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Auction Houses Didn't Abide by Terms
Of Pact Made by Chairmen, Witness Says

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Kathryn Kranhold Staff Reporter of The Wall Street Journal

Updated Nov. 29, 2001 12:01 a.m. ET

NEW YORK -- An economist for
Sotheby's Holdings Inc.'s
former chairman, A. Alfred Taubman, who is on trial for price fixing, testified that the large auction houses didn't abide by terms of a secret business agreement allegedly hatched by Mr. Taubman and his counterpart at Christie's International PLC.

In federal district court here, Christine Nelson, a managing director with economic consultants Cornerstone Research, said an analysis of Sotheby's and Christie's contracts show that both houses made interest-free advances to sellers, and donations to their favorite charities, to win business from 1992 through 1995. The practices are among those the government alleges the two men agreed to stop.

For example, Ms. Nelson said Sotheby's agreed to contribute all the proceeds from the sale of a catalog for the Jacqueline Kennedy Onassis auction to charity in 1996. She said Sotheby's former Chief Executive Diana D. Brooks signed off on the contract in January 1995.

In another deal, in January 1994, Sotheby's gave a $16.5 million interest-free advance to the estate of H. Gates Lloyd, a deputy director with the Central Intelligence Agency and a Philadelphia investment banker.

Ms. Nelson didn't address whether the houses stuck to the secret 1993 agreement that allegedly called for a new nonnegotiable commission schedule for art sellers.

Both in testimony and documents, the prosecution has tried to prove that Mr. Taubman conspired with Sir Anthony Tennant, Christie's former chairman, to fix commission fees as a means to boost the bottom line at a time when the art industry was struggling. Prosecutors have attempted to show that the conspiracy included an agreement between the two men to stop a variety of costly practices.

The former chief executives of Sotheby's and Christie's, Ms. Brooks and Christopher Davidge, respectively, have both testified that their bosses instructed them to carry out an agreement to establish matching commission rates in addition to the other business terms.

Ms. Brooks pleaded guilty to violating antitrust laws, and has testified in exchange for leniency. Christie's and Mr. Davidge have received conditional amnesty in exchange for their cooperation.

Messrs. Taubman and Tennant have both denied taking part in any agreement. Mr. Tennant has refused to come to the U.S. to stand trial; the U.S. can't extradite him under British law.

Mr. Taubman's attorney, James Rouhandeh, was seeking to show Wednesday that the two houses weren't conspiring after all. He also was trying to poke holes in the government's key document, a memo Mr. Tennant had written allegedly outlining terms of the agreement.

In her testimony, Ms. Nelson said the two houses also continued to make risky advances to clients consigning individual pieces of art or collectibles. She said Sotheby's advances on single lots more than doubled in 1994 with nine advances from four in 1993. Christie's gave about 20 single-lot advances in both 1993 and 1994, she said.

Ms. Nelson testified that the number of interest-free advances granted by both Sotheby's and Christie's also increased. She said Sotheby's gave three interest-free advances in 1992, and six each in 1993 and 1994. Christie's gave eight interest-free loans in 1992, 13 in 1993 and 35 in 1994, she said.

Under brief cross-examination by the prosecution, Ms. Nelson testified that she hadn't taken into account the overall number of advances given by Sotheby's and Christie's. The prosecution was trying to show that the actual percentage of advances had decreased over the years once the two auction houses started implementing their alleged agreement.